Tailspin in diamonds speculated

ByWith Analysis From Monitor Correspondents Around The WorldEdited By Karla VallanceJanuary 27, 1982

New York
— The De Beers Consolidated Mines Ltd. cartel could lose its hold on the world diamond market and be unable to prevent a crash in diamond prices, according to The Atlantic Monthly magazine.

US diamond experts discount the report.

De Beers, the South African company that has controlled the world diamond trade since the 19th century, faces the threat of an influx of diamonds from several sources that could flood the market and permanently deflate the price of diamonds, the article said.

De Beers has had the clout to regulate demand and supply so that diamonds went up in price almost every year since the depression. But since a speculative mania drove diamond prices to record highs in March 1980, so-called investment-quality diamonds have plummeted 50 percent in value.

It is conservatively estimated that the public holds over 500 million carats of gem diamonds - more than 50 times the annual output of the diamond cartel. ''The moment a significant portion of the public begins selling diamonds from this inventory, the price of diamonds cannot be sustained,'' the magazine said. Panic on the part of investors who began buying investment diamonds in the late 1970s could end the diamond business, The Atlantic said.

Diamond prices could also be devalued by the liquidation of Israel's large diamond stockpile. But the most serious threat to De Beers could be the vast diamond deposits discovered in Western Australia in the late 1970s. The Western Australian government has not yet decided whether to make a deal with the cartel , the magazine said.